Entries Posted in Post Offices & Retail Network

Reshaping a postal network doesn’t happen overnight. Especially one built to handle mainly letters and flats and not the tremendous anticipated growth in parcels. The Postal Service is attempting to tackle realignment in two phases, playing out over 4 years.

Phase one was completed in 2013 and resulted in 141 consolidations for an expected cost savings of about $865 million. To achieve full cost savings, however, the Postal Service also had to reduce service standards for First-Class Mail. Phase two, which started in January and will run through late summer, calls for consolidating 82 mail processing facilities and eliminating most overnight delivery of First-Class Mail. It will also change service standards for Periodicals Mail. All other products will stay the same.

The Postal Service launched its overall consolidation plan in 2012 to adjust the size of the network and workforce to the reduced demand. The plan calls for fewer processing facilities and for machinery to operate longer and more efficiently. Total mail volume has declined 27 percent since its peak in 2006, and single-piece First-Class Mail – primarily correspondence, bill payments, and greeting cards – has been hit even harder. It has declined by more than half in the past decade.

Speaking at the February Mailers’ Technical Advisory Committee meeting, postal officials said they are confident consumers will not notice the service standard changes. Surveys suggest most people don’t know what the service standards are, but they do care when their mail arrives in their mailbox. So the Postal Service is working to ensure consumers receive their mail at the same time each day. They also reminded people that consolidation doesn’t necessarily mean closing. Some facilities could be repurposed for other services.

Business mailers have generally supported efforts to eliminate excess capacity and reduce costs, with the exception of those whose business model depends on overnight service. But mailers also worry that some costs could be shifted to them. Unions have opposed the consolidation plan, arguing it downgrades service and delays mail at a time when the Postal Service should be stepping up its efforts to compete with digital communications. As for consumers, the Postal Service may be right that they won’t really care – unless they notice a change in delivery performance. It’s also worth noting that service standards are not changing for Priority Mail or Package Services, so the Postal Service should be able to satisfy customers’ growing demand for packages.

Are you concerned that network consolidation has resulted or could result in mail delays? Or do you think network rationalization is necessary to reduce costs? If you oppose consolidation, how do you recommend the Postal Service better match its capacity to demand?

People care a lot about their local post offices, at least if the number of news stories on the topic and the comments we receive on our blog and Audit Project pages are indications.

For some, the neighborhood Post Office serves as everything from the source of a community’s name and identity, to a spot where neighbors can connect and keep track of each other. Of course the Post Office is also the place where folks drop off holiday goodies and care packages, or buy stamps and other mailing supplies. And rentable Post Office boxes create physical addresses for local entrepreneurs.

So, it’s no surprise that when the Postal Service decides to relocate a Post Office – whether moving it to a less costly property or consolidating several facilities into one –communities have an opinion about it.

The ubiquity of its Post Office network is one of the Postal Service’s most valuable assets. But, the Postal Service says more than one-third of postal retail purchases are now made somewhere other than a Post Office, including on usps.com. It’s therefore understandable that the Postal Service is making changes, such as instituting shorter hours of operation, encouraging local businesses to offer some postal services, or consolidating low-traffic facilities.

The Postal Service recognizes that it matters to customers when their local Post Office is shuttered. And there are specific regulations and guidelines designed to give affected communities information about planned moves, and the right to appeal portions of those plans. But is the Postal Service following the letter and spirit of those regulations and guidelines? Our recent audit looked at the relocation process and we found it could be more transparent. The public may not always have the information it needs, when it needs it, to understand the implications of relocations and make meaningful comments on them.

What about you? If you have experienced a Post Office relocation in your community, were you satisfied with how and when you were informed? What, if any, changes could be made to make Post Office relocations more transparent or otherwise improve the process?

Network consolidation will return in January 2015, a year after going on hiatus. The U.S. Postal Service announced recently that it would resume consolidations, closing up to 82 mail processing facilities. This second phase of the network consolidations should be done prior to the 2015 fall mailing season.

The Postal Service expects the changes to yield $750 million in annual savings and to affect about 15,000 employees. In 2012 and 2013, the Postal Service consolidated 141 mail processing facilities, resulting in cost savings of about $865 million.

Loyal readers of our blog will recall that the Postal Service put its network consolidation plans on hold in early 2014 while it reconsidered its proposed changes to service standards for First-Class Mail. (See our blog from earlier this year on the delay.) Phase two will affect the service standards for First-Class Mail and Periodicals as well, eliminating the overnight standard for most First-Class Mail. Periodicals service standards would range from 3 days to 9 days, versus the current 2 to 9 days.

The Postal Service says eliminating excess capacity through consolidation is one of the few options it has to cut costs. Consolidation will also allow the Postal Service to establish a “low-cost, technology-centric delivery platform necessary to serve the mailing and shipping industry for decades to come.”

Still, the planned consolidations are likely to rankle some. At least one postal union has already come out strongly against the plan, saying it will degrade service and lead to mail delays. It intends to vigorously fight the closures. On the other hand, industry has generally supported Postal Service efforts to reduce costs and improve efficiencies, as long as service isn’t irreparably harmed.

We welcome your thoughts. Should the Postal Service continue with consolidations given the decline in mail volume and the potential cost savings? Or should the Postal Service first explore ways to use the excess capacity to provide services that might yield additional revenue sources, such as warehousing or other logistics services?

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